Securing seized crypto-assets

Gaining control of a suspect's keys is not the end of a seizure; it is the start of a period, often years long, in which the authority is responsible for assets that anyone holding a copy of the key can take in seconds. Custody is a weak point: value already traced and seized can still be lost through a leaked key, a mistyped address or an insider. This lesson covers how investigators move seized crypto-assets into custody the authority alone controls, and how they document every step so the seizure survives scrutiny.

Why custody is where seized value is lost

Three risks dominate once the authority has access to a suspect's wallet.

• Copies of the key. A seed phrase found on paper, in a photo or on a seized device may exist elsewhere: with an accomplice, in a cloud backup, on a second hardware wallet. Whoever holds a copy can move the funds the moment they learn of the arrest.
• Operational error. A mistyped or substituted destination address, a transfer to the wrong chain, or a token sent to a contract that cannot return it is final. No helpdesk reverses an on-chain transfer.
• Insiders. Staff with access to seized keys are a risk in their own right. In the Silk Road investigation, two agents working on the case diverted crypto-assets to themselves, which later investigations proved. Dual control exists because good people are not enough.

The working rule follows: move seized assets out of any wallet the suspect knew about, promptly, into keys generated fresh for the authority, under dual control, and record the transfer as evidence. How the seed or wallet was found and lawfully accessed is covered in the lessons Search and seizure of crypto at the scene and Wallet recovery under lawful authority; this lesson starts once access exists.

Choosing the custody model

Agencies use four broad models. Many keep more than one, choosing by value, asset type and duration.

Whatever the model, the keys are generated fresh, for the authority, before the seizure. Key generation follows a written ceremony: new devices taken from tamper-evident packaging with serial numbers recorded, generation on an offline machine, seed backups written by hand (or stamped on metal) and sealed in numbered bags stored in separate locations, and two officers present throughout. The ceremony can be video-recorded for the record, but the seed words themselves are never filmed, photographed or typed into a networked computer.

Segregate by case. A fresh address, or a fresh wallet, per case or per exhibit keeps balances apart, so returns, sales and audits never need an allocation exercise. Pooling seized assets from several cases in one address recreates the commingling problem the investigation just untangled.

Executing the transfer

A seizure transfer is a planned operation with roles: an operator who builds and signs the transaction, a verifier who checks every field independently, and a recorder who logs times and identifiers. The core steps:

1. Inventory first. Before moving anything, record every asset at the source: native coins, tokens, NFTs, staked or locked positions, with balances at a stated block height. Screenshots are supporting material; the block-height record is the evidence.
2. Verify the destination. The verifier reads the full destination address from the authority's register and compares it character by character with what the signing device displays. Never copy an address from email, chat or a clipboard: address-substitution malware and look-alike "poisoned" addresses exist.
3. Decide on a test transaction. A small test transfer, confirmed on an independent node or explorer, proves the destination is correct and controlled. It costs minutes. If there is a real risk that someone else holds the key, the team may skip the test, after verifying control of the destination by signing a message from it, and move everything in one transfer. Record which choice was made and why.
4. Fund gas where needed. Tokens on account-model chains cannot move without the native coin for fees. If the seized address holds tokens but no gas, the authority sends a small amount from a dedicated gas wallet. This creates an on-chain link from the authority to the suspect's address that others may see, so use a wallet reserved for the purpose and record the transfer.
5. Sweep with an adequate fee. Until a transaction confirms, anyone else holding the key can broadcast a competing spend with a higher fee. Set a fee for prompt confirmation and watch the transaction through to the case's finality threshold (see the lesson Preserving on-chain evidence).
6. Confirm and reconcile. Check the source is empty, the destination balance equals the seized amount minus fees, and every txid and block height is logged.

{
  "exhibit": "EX-0412-07",
  "action": "seizure_transfer",
  "chain": "bitcoin",
  "source": "bc1q…9tm4 (recovered from seed exhibit EX-0412-03)",
  "destination": "bc1q…h2xw (case wallet CW-0412, 2-of-3 multisig)",
  "balance_before": "18.00000000 BTC at block 940,211",
  "test_tx": "skipped: risk of key copies; destination verified by signed message",
  "txid": "c4e8…71ab",
  "amount_sent": "17.99986400 BTC",
  "fee": "0.00013600 BTC",
  "confirmed_block": "940,214",
  "operator": "officer 2231", "verifier": "officer 1876",
  "time_utc": "2026-04-04T10:17:42Z"
}

The record ties the transfer to the exhibit from which the key came, states the balance before the transfer at a block height, explains why no test was sent, and shows that the amount received plus the fee equals the balance seized (17.999864 + 0.000136 = 18.0 BTC). Two named roles sign it off. The record joins the exhibit's chain-of-custody log, as described in the lesson Hashing, logging and chain of custody.

Assets that need special handling

The seized seed or device remains an exhibit after the sweep. It proves where the funds came from, and new assets may still arrive at the old addresses, so it is never destroyed or reused.

Proving control later without moving funds

Courts, auditors and defense experts will want to know that the authority still holds what it seized. Moving funds to prove it adds risk and cost. A signed message proves control instead: the custodian signs a statement including the date and case number with the case wallet's key, and anyone can verify the signature against the address (BIP-322 defines a generic format for Bitcoin; Ethereum wallets use the EIP-191 personal message standard). Combine this with a periodic reconciliation of the asset register against on-chain balances at a stated block height, signed by someone outside the custody team.

Security, insurance and governance

A short written policy should cover who may sign, the m-of-n threshold by value, where devices and backups are stored, how signers are replaced when staff leave, how access is logged, and how incidents are reported. Self-custodied assets are rarely insured, which is one reason agencies holding large values use institutional custodians or split holdings between models. Whatever the choice, the authority remains accountable to the court for the assets, and every custody decision should be one it can explain from its records.

Exam focus: why seized assets are moved out of any wallet the suspect knew about, and promptly; single-key, multisig, threshold (MPC) and institutional custody, with their trade-offs; key generation ceremonies and never filming or typing seed words; segregation by case; the roles and steps of a seizure transfer, including destination verification and the test-transaction decision; gas funding for tokens and the link it creates; fee and finality when key copies may exist; reconciling amounts and fees in the transfer record; special assets (stablecoins, staking, NFTs, multisig, airdrops); proving control by signed message rather than moving funds.